Oil prices saw a modest increase on Monday as investors weighed the potential impacts of new U.S. sanctions on Iranian exports against ongoing ceasefire talks aimed at resolving the Russia-Ukraine conflict, which could boost Russian oil supplies to global markets.
By 0735 GMT, Brent crude futures had risen by 4 cents to $72.20 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 8 cents, or 0.1%, reaching $68.36. Earlier in the day, prices had fallen slightly.
Both benchmarks had closed higher on Friday, marking a second consecutive week of gains. The uptick was driven by the fresh U.S. sanctions on Iran and a new output plan from the OPEC+ group, which raised expectations of tighter oil supply.
Improved Market Sentiment
The market sentiment towards oil prices has improved recently, largely due to a technical rebound from previous oversold conditions.
IG market strategist Yeap Jun Rong attributed the shift to the heightened supply risks caused by U.S. sanctions on Iranian exports, along with growing optimism that U.S. reciprocal tariffs might be less severe than initially anticipated.
Iran’s oil exports, particularly to China, are expected to fall in the near term due to the latest U.S. sanctions targeting a privately-owned refiner and tankers.
These measures have driven up shipping costs. However, traders anticipate that buyers will seek alternative routes to maintain some level of Iranian crude imports.
Mixed Demand-Supply Outlook
Despite recent gains, the broader demand-supply outlook for oil remains uncertain. Yeap noted that the ongoing ceasefire talks between Ukraine and Russia could lead to increased Russian oil exports if a resolution is reached, while the planned output increase by OPEC+ as early as April suggests further supply additions to the market.
A U.S. delegation is set to meet with Russian officials on Monday in a bid to make progress on a ceasefire in the Black Sea region and a broader cessation of violence in the ongoing war in Ukraine. This follows discussions held with Ukrainian diplomats on Sunday.
OPEC+ Production Cuts
Oil prices also reflect concerns over OPEC+’s upcoming production trends. On Thursday, the organisation announced new schedules for seven member nations to implement further oil output cuts to compensate for production levels that exceeded agreed limits.
These additional cuts will surpass the planned production hikes scheduled for April.
Since 2022, OPEC+ has been working to support the market by cutting output by 5.85 million barrels per day, around 5.7% of global supply. On March 3, the group confirmed that eight of its members would increase production by 138,000 barrels per day starting in April, citing improved market fundamentals.
Investor Caution Amid Uncertainty
Toshitaka Tazawa, an analyst at Fujitomi Securities, pointed out that while expectations for progress in peace negotiations between Russia and Ukraine, along with the potential easing of U.S. sanctions on Russian oil, had put downward pressure on prices, investors are still hesitant to take large positions in the market.
This caution is driven by uncertainty surrounding OPEC+’s production strategies beyond April.
Additionally, BP’s upcoming shareholder meeting on April 17 is expected to see activist investor Follow This call for a vote against the reappointment of BP Chair Helge Lund, as part of ongoing debates about the company’s environmental and sustainability strategies.
As the situation develops, investors continue to monitor geopolitical tensions, supply risks, and OPEC+ production plans closely, all of which will play a critical role in shaping oil market dynamics in the coming months.
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